Foreign bank accounts, foreign credit card machines, foreign currency cash payments and, now, even PayPal transfers—the informal foreign-owned business sector is thriving in some of Sri Lanka’s busiest tourism hotspots. But where do their revenues go?
Emotive problem
The Sunday Times delved into the increasingly emotive issue of foreigners operating untaxed, unregulated ventures around the country. We interviewed both Sri Lankans and noncitizens in Ahangama, Midigama, Arugam Bay, Kalpitiya and their environs. Nobody wished to be named, fearing repercussions. Everybody said these businesses were growing in number; and suspected that the bulk of their earnings were banked outside of Sri Lanka.
The venues that are most popular with tourists are run by foreigners. And driven largely by commercial self-interest, these entrepreneurs promote Sri Lanka better than any old brochure or formulaic road show does.
Many of them started out as visitors, stayed on or came back. Others swooped in when they learned how the lax implementation of laws made it easy to set up unregulated businesses in Sri Lanka (notwithstanding other challenges, like bribery and corruption).
There are also travelling teachers—mostly yoga and surfing—who go where the season takes them. And there are “volunteers” that hold tourist status and work to pay for their stay. Some are happy with just food and accommodation.
Another group escapes turmoil back home by residing long-term in Sri Lanka. They lease properties and sub-let them to tourists or conduct other activities. Again, how much of their earnings are ploughed back into the local economy is unexplored territory.
And sometimes their politics triggers ugly sparring. Recently, supporters of the Palestinian cause found themselves the target of abuse, and even an avalanche of negative online reviews of their establishments.
The rule-followers
But there is a category, too, that does everything by the book—finding Sri Lankan partners, investing money, registering their ventures and getting liquor licences (via the local associate), contributing taxes, securing the appropriate visas for themselves and any foreign staff, employing locals and paying mandatory retirement benefits while helping local communities.
“It’s absolutely not difficult,” said one such European business owner. He found a lawyer, registered his company and, after obtaining a resident visa, applied for and obtained a trade licence from the pradeshiya sabha. He pays taxes every year and encourages other foreigners to follow the rules.
These ethical players evoked the cautionary tale of Bali, that idyllic Indonesian island where authorities have cracked down on tourists and foreigners violating their visa conditions to run accommodation and other ventures while avoiding tax.
The activities that the Balinese regulators had found so objectionable are identical to the practices now drawing criticism here. But while Bali has introduced effective procedures to curb irregular business and tax avoidance, Sri Lanka is still at the initial stages of a problem that threatens to get worse if not nipped in the bud.
What Sri Lanka is seeing, said one local yoga teacher, are the “Bali spillovers”. “After Ubud in Bali got too crowded, word got round that Sri Lanka has potential, is untapped and you can do certain things, they all started flocking here,” he said.
They made it cool
Historic Ahangama in the Galle district is today a changed place. A recent influx of enterprising foreigners has transformed this sleepy seaside town into a hip, laidback surf-and-yoga destination where trendy cafes and restaurants dish up global cuisines produced by international cooks.
The positive impact these foreigners have had on the Ahangama tourism landscape is widely recognised, even by those who question their financial model.
“I know this village from childhood,” said a Sri Lankan businessman whose family has owned and run a hotel in Ahangama for decades. “After the influx of tourists, the local boys who were born and raised on this beach have seen what these foreigners do and they’ve done better.”
Property prices have skyrocketed, meaning that the local owners earn more. The rents are “more than Colombo-7 prices”. For instance, a small space of 500 sq ft can go for around Rs. 200,000 a month (there is another discussion about gentrification to be had here). And the Sri Lankans who work at these foreign-run enterprises gain expertise and training that take them closer to being global citizens.
“Someone was saying that, in the village, a cup of coffee is a cup of coffee,” said one South coast resident. “A cappuccino, a latte, a caffe Americano, these things are new to them. Having these (foreign) businesses helps because the locals get elevated. They’re seeing a new world—from the aesthetics to the design to how things are run. It’s an education they would otherwise not be able to get.”
“It’s good for the community, in terms of the wealth of knowledge and expertise that has come in,” a yoga teacher said. “We all have to admit that there’s a better brand of wellness tourism, better brand of yoga here, because of these travelling teachers.”
Nagging questions
But this is a double-edged sword and it’s starting to cut.
Recently, an Instagram account called “southcoast.busted” drew widespread attention to how foreigner-run tourism ventures were evading taxes. It publicized how an Israeli group openly organised an outdoor party for which it hired DJs on tourist visas. Ticket sales were linked to an offshore account. “Thank you for contributing to the bankruptcy of this country!” it said. Within weeks following a concerted effort by these foreign parties to track the page owners, the account was twice hunted down and is no longer online. Meanwhile, more parties are expected in the future and there is no compulsion yet for the payment model to change.
The most popular overseas credit card reader used is called SumUp. Meanwhile, one local South coast resident described how a restaurant asked her to make a Euro payment for the food she purchased into a PayPal account, despite this venture even having a Sri Lankan bank account (so not all entities engaging in such practices are unregistered).
As visitor numbers balloon–but are not translated into revenues for the country–people are starting to do the math. A wellness guru said a class goes for around Rs. 3,000 per attendee. The teacher gets 60 percent and the venue (hotel, or yoga studio or just the space) gets 40 percent. On average, there are around 10-12 people per class and there are, at most, three sessions per day. Separately, there are yoga workshops which are priced at Rs. 4000-5000.
Ceremonies can cost up to Rs. 8,000 depending on the number of practitioners, materials or implements used. Retreats have different pricing, from US$ 200-2000 based on the duration and location. Foreign-operated yoga schools offer one-month courses for between US$ 4,000 and 5000 while local schools can cost US$ 1,500-3000 per training.
“Some places conduct back-to-back courses and they’re full house,” the wellness teacher said. “If there are around 20 attendees, do the math and calculate the profits. I think the Sri Lankan authorities should understand that there is taxable income in this industry.” He maintains that these payments rarely, if ever, enter the local banking system. And most travelling yoga teachers are on tourist visa.
“I think the authorities should recognize the taxable income in this industry, as it is booming and expected to increase in the near future,” he said. “This is easy revenue if you introduce a feasible regulatory measure.”
And surf camps were another lucrative venture with Ahangama and Arugam Bay topping the list. “It’s the yoga camps and surf camps, more than cafes and restaurants, that are really making big bucks,” another Ahangama resident said.
https://www.sundaytimes.lk/240204/news/alls-not-sunny-in-booming-foreign-run-businesses-547451.html
Emotive problem
The Sunday Times delved into the increasingly emotive issue of foreigners operating untaxed, unregulated ventures around the country. We interviewed both Sri Lankans and noncitizens in Ahangama, Midigama, Arugam Bay, Kalpitiya and their environs. Nobody wished to be named, fearing repercussions. Everybody said these businesses were growing in number; and suspected that the bulk of their earnings were banked outside of Sri Lanka.
The venues that are most popular with tourists are run by foreigners. And driven largely by commercial self-interest, these entrepreneurs promote Sri Lanka better than any old brochure or formulaic road show does.
Many of them started out as visitors, stayed on or came back. Others swooped in when they learned how the lax implementation of laws made it easy to set up unregulated businesses in Sri Lanka (notwithstanding other challenges, like bribery and corruption).
There are also travelling teachers—mostly yoga and surfing—who go where the season takes them. And there are “volunteers” that hold tourist status and work to pay for their stay. Some are happy with just food and accommodation.
Another group escapes turmoil back home by residing long-term in Sri Lanka. They lease properties and sub-let them to tourists or conduct other activities. Again, how much of their earnings are ploughed back into the local economy is unexplored territory.
And sometimes their politics triggers ugly sparring. Recently, supporters of the Palestinian cause found themselves the target of abuse, and even an avalanche of negative online reviews of their establishments.
The rule-followers
But there is a category, too, that does everything by the book—finding Sri Lankan partners, investing money, registering their ventures and getting liquor licences (via the local associate), contributing taxes, securing the appropriate visas for themselves and any foreign staff, employing locals and paying mandatory retirement benefits while helping local communities.
These ethical players evoked the cautionary tale of Bali, that idyllic Indonesian island where authorities have cracked down on tourists and foreigners violating their visa conditions to run accommodation and other ventures while avoiding tax.
The activities that the Balinese regulators had found so objectionable are identical to the practices now drawing criticism here. But while Bali has introduced effective procedures to curb irregular business and tax avoidance, Sri Lanka is still at the initial stages of a problem that threatens to get worse if not nipped in the bud.
What Sri Lanka is seeing, said one local yoga teacher, are the “Bali spillovers”. “After Ubud in Bali got too crowded, word got round that Sri Lanka has potential, is untapped and you can do certain things, they all started flocking here,” he said.
They made it cool
Historic Ahangama in the Galle district is today a changed place. A recent influx of enterprising foreigners has transformed this sleepy seaside town into a hip, laidback surf-and-yoga destination where trendy cafes and restaurants dish up global cuisines produced by international cooks.
The positive impact these foreigners have had on the Ahangama tourism landscape is widely recognised, even by those who question their financial model.
“I know this village from childhood,” said a Sri Lankan businessman whose family has owned and run a hotel in Ahangama for decades. “After the influx of tourists, the local boys who were born and raised on this beach have seen what these foreigners do and they’ve done better.”
Property prices have skyrocketed, meaning that the local owners earn more. The rents are “more than Colombo-7 prices”. For instance, a small space of 500 sq ft can go for around Rs. 200,000 a month (there is another discussion about gentrification to be had here). And the Sri Lankans who work at these foreign-run enterprises gain expertise and training that take them closer to being global citizens.
“Someone was saying that, in the village, a cup of coffee is a cup of coffee,” said one South coast resident. “A cappuccino, a latte, a caffe Americano, these things are new to them. Having these (foreign) businesses helps because the locals get elevated. They’re seeing a new world—from the aesthetics to the design to how things are run. It’s an education they would otherwise not be able to get.”
“It’s good for the community, in terms of the wealth of knowledge and expertise that has come in,” a yoga teacher said. “We all have to admit that there’s a better brand of wellness tourism, better brand of yoga here, because of these travelling teachers.”
Nagging questions
But this is a double-edged sword and it’s starting to cut.
Recently, an Instagram account called “southcoast.busted” drew widespread attention to how foreigner-run tourism ventures were evading taxes. It publicized how an Israeli group openly organised an outdoor party for which it hired DJs on tourist visas. Ticket sales were linked to an offshore account. “Thank you for contributing to the bankruptcy of this country!” it said. Within weeks following a concerted effort by these foreign parties to track the page owners, the account was twice hunted down and is no longer online. Meanwhile, more parties are expected in the future and there is no compulsion yet for the payment model to change.
The most popular overseas credit card reader used is called SumUp. Meanwhile, one local South coast resident described how a restaurant asked her to make a Euro payment for the food she purchased into a PayPal account, despite this venture even having a Sri Lankan bank account (so not all entities engaging in such practices are unregistered).
As visitor numbers balloon–but are not translated into revenues for the country–people are starting to do the math. A wellness guru said a class goes for around Rs. 3,000 per attendee. The teacher gets 60 percent and the venue (hotel, or yoga studio or just the space) gets 40 percent. On average, there are around 10-12 people per class and there are, at most, three sessions per day. Separately, there are yoga workshops which are priced at Rs. 4000-5000.
Ceremonies can cost up to Rs. 8,000 depending on the number of practitioners, materials or implements used. Retreats have different pricing, from US$ 200-2000 based on the duration and location. Foreign-operated yoga schools offer one-month courses for between US$ 4,000 and 5000 while local schools can cost US$ 1,500-3000 per training.
“Some places conduct back-to-back courses and they’re full house,” the wellness teacher said. “If there are around 20 attendees, do the math and calculate the profits. I think the Sri Lankan authorities should understand that there is taxable income in this industry.” He maintains that these payments rarely, if ever, enter the local banking system. And most travelling yoga teachers are on tourist visa.
“I think the authorities should recognize the taxable income in this industry, as it is booming and expected to increase in the near future,” he said. “This is easy revenue if you introduce a feasible regulatory measure.”
And surf camps were another lucrative venture with Ahangama and Arugam Bay topping the list. “It’s the yoga camps and surf camps, more than cafes and restaurants, that are really making big bucks,” another Ahangama resident said.
https://www.sundaytimes.lk/240204/news/alls-not-sunny-in-booming-foreign-run-businesses-547451.html
